Crisis to creativity: Evolving to meet needs of millennials and Gen Z

Insurance is designed to shield against uncertainty. However, while it was once a universal safety net, life insurance has seen a decline in ownership in recent years.

This is especially marked among younger generations. Young adults today are hitting life milestones like marriage, having children and home-buying much later than their parents. As per data from Pew Research Center, in 2021, only 22% of 25-year-olds were married compared with 63% in 1980, 17% had children compared with 39% in 1980, and 68% were living independently compared with 84% in 1980. 

This shift is evident in my own family. For generations, newborns were insured from birth. My great-grandmother bought a $1,500 policy for my grandmother, a tradition continued with my mother and brother. But as a child of the 1970s, I was the first in my family who did not receive a life insurance policy at birth. This was clearly a result of changing relevance given the stable economic conditions at the time, unlike past generations who faced more uncertainty.

Today, less than 60% of Americans have life insurance, a number that has been dropping since 1971, with a 13% decline in the past decade. There is a growing trend among Americans to focus on short-term financial priorities. 

The 2024 Insurance Barometer Study from LIMRA and Life Happens reveals that people prioritize vacations (29%), recreational activities (23%) and paying monthly bills (49%-60%) over saving for retirement or planning for potential catastrophes. The survey also suggests that most people overestimate the price of life insurance. More than 60% of respondents believed the cost of a life insurance policy would be $500 or more when in fact the average policy costs around $200 per year. 

Life insurance is battling a misconception that it is “too expensive,” with consumers valuing it below other financial priorities. At the same time, advances in health care, shifting socioeconomic conditions and fewer war casualties have made the threat of death feel less imminent. As a result, less than half of millennials and Generation Z individuals currently have a life insurance policy. 

But there is still light at the end of the tunnel for the life insurance industry.

Younger adults are open to innovative, tech-driven insurance solutions. Life insurance is not just about death benefits; it can replace income, serve as an investment, cover long-term care and more.

Insurers might consider offering products that resonate with millennials and Gen Zers. For example, a return-of-premium term policy not only provides protection in case of death, but also aligns with the savings mindset of the younger generation. Unlike a typical term policy, policyholders won’t lose the money if they outlive the term, making it more appealing for those planning for early retirement.

Engaging with consumers in meaningful ways

The consumer behaviors, goals, needs and expectations of millennials and Gen Zers are markedly different from those of their baby boomer predecessors. As baby boomers phase out of the target market for life insurance, the U.S. is poised to experience an unprecedented wealth transfer. This generational shift highlights a critical challenge: bridging the gap between the evolving needs of younger consumers and the traditional life insurance market.

The Insurance Barometer Study shows that in 2024, the need gap among adults with or without life insurance has widened to 42%, compared with 40% three years ago. This gap underscores the urgent need for education and communication efforts that clearly convey the multifaceted value of life insurance.

Creative marketing and clear communication are crucial to engaging this new generation. Reaching millennials and Gen Zers means meeting them where they are — on digital platforms. Using storytelling to showcase real-life scenarios where life insurance makes a tangible difference is now table stakes. However, it’s also important to be prepared for face-to-face interactions, phone calls and other engagement platforms, as these generations have diverse preferences for how they interact.

Moreover, these generations are increasingly prioritizing sustainability and ethical practices. Insurers can engage this audience by introducing green insurance products or purpose-driven policies that invest in environmentally sustainable projects or allow policyholders to contribute to causes they care about.

Ultimately, life insurance must shake off its reputation as death insurance. Younger consumers seek multipurpose products that align with their life goals and values. Products that offer benefits for living that can be used during their own lifetime for critical illness or long-term care are more appealing to a demographic that is focused on savings, early retirement and financial flexibility.

Future-proofing life insurance

Life insurers must bridge the gap between their offerings and the expectations of younger consumers in order to remain relevant to future generations. This requires evaluating the effectiveness of current systems and determining whether they can support a more flexible future, which may involve integrating modern core systems, leveraging artificial intelligence, eliminating mainframes or implementing digital application programming interface wrappers to de-risk legacy systems.

Insurers should innovate their business models to better cater to the unique needs and preferences of younger consumers. This could include exploring subscription-based models, flexible payment plans and products designed to provide benefits during the policyholder’s lifetime — moving beyond the traditional scope of life insurance. Additionally, offering customizable options and integrating wellness capabilities to enhance the user experience can further align with the expectations of millennials and Gen Zers.

Many providers are behind the times. I’ve had to make life insurance claims myself, and I experienced sluggish technology, customer service representatives reading off a jargon-heavy script and a lack of communication between departments. Younger generations will not put up with subpar customer service, particularly at a time when empathy and guidance are more important than ever.

As wealth is transferred to younger generations, insurers must focus on building long-term relationships with these new policyholders by offering ongoing support and education, tailoring products to meet evolving needs, and ensuring that life insurance remains a relevant and valuable part of their financial planning journey.